Stock Index Futures Slip Ahead of Key U.S. Retail Sales Data, U.S. Bank Earnings on Tap

December S&P 500 futures (ESZ23) are down -0.26%, and December Nasdaq 100 E-Mini futures (NQZ23) are down -0.27% this morning as investors geared up for quarterly reports from more big banks and industry heavyweights while also awaiting crucial U.S. retail sales data.

In Monday’s trading session, Wall Street’s major indices closed in the green, with the blue-chip Dow rising to a 3-week high. Charles Schwab Corp (SCHW) climbed over +4% after the brokerage firm posted better-than-expected Q3 profit, and its finance chief said outflows were starting to abate. Also, Lululemon Athletica Inc (LULU) surged more than +10% after S&P Dow Jones Indices announced that the stock would replace Activision Blizzard in the S&P 500 Index, effective Wednesday. In addition, Microsoft Corporation (MSFT) rose over +1% after Piper Sandler named the company its “highest conviction large-cap stock to own into year-end” with a price target of $400.

“There’s a little bit of risk-on sentiment coming from a pretty solid start to their earnings season. It says that what the economic data is also saying, which is that the economy is stronger than we were giving it credit for at the year’s start, certainly not recessionary,” said Ross Mayfield, investment strategy analyst at Baird.

Data on Monday showed the U.S. NY Empire State manufacturing index, a gauge of manufacturing activity in New York State on current business conditions, came in at -4.60 in October, stronger than expectations of -7.00.

Meanwhile, Philadelphia Fed President Patrick Harker reiterated on Monday his comments from last week, affirming that the central bank can maintain its benchmark interest rate steady as long as there is no abrupt shift in the economic data.

U.S. rate futures have priced in a 9.9% probability of a 25 basis point rate increase at the November meeting and a 30.3% chance of a 25 basis point rate hike at the December FOMC meeting.

On the earnings front, notable companies like J&J (JNJ), Bank of America (BAC), Lockheed Martin (LMT), Goldman Sachs (GS), Prologis (PLD), and United Airlines Holdings (UAL) are set to report their quarterly figures today.

In other news, U.S. President Joe Biden is set to visit Israel on Wednesday as part of an effort to prevent the escalation of the conflict. Secretary of State Antony Blinken also returned to Israel for discussions with Prime Minister Benjamin Netanyahu following talks with Arab governments.

Today, all eyes are focused on U.S. Retail Sales data in a couple of hours. Economists, on average, forecast that September Retail Sales will stand at +0.3% m/m, compared to the previous value of +0.6% m/m.

Also, investors will likely focus on U.S. Core Retail Sales data, which came in at +0.6% m/m in August. Economists foresee the September figure to be +0.2% m/m.

U.S. Industrial Production data will come in today. Economists expect September’s figure to be +0.1% m/m, compared to the previous number of +0.4% m/m.

U.S. Manufacturing Production data will be reported today as well. Economists foresee this figure to stand at +0.1% m/m in September, compared to the previous number of +0.1% m/m.

In addition, market participants will be looking toward a batch of speeches from Fed officials Williams, Bowman, and Barkin.

In the bond markets, United States 10-year rates are at 4.741%, up +0.66%.

The Euro Stoxx 50 futures are down -0.14% this morning as investors shifted their attention to corporate earnings while also maintaining caution ahead of crucial economic data from the United States. Losses in mining stocks are leading the overall market lower. According to a monthly survey published Tuesday, Germany’s economic outlook improved more than expected in October, primarily due to the anticipation of a further decrease in inflation. In corporate news, Telefonaktiebolaget Lm Ericsson (ERICB.S.DX) plunged over -7% after the Swedish 5G equipment maker reported a fall in Q3 revenue and warned of ongoing weak demand.

U.K.’s Average Earnings Index +Bonus, Germany’s ZEW Economic Sentiment, and Eurozone’s ZEW Economic Sentiment were released today.

U.K. August Average Earnings Index +Bonus has been reported at 8.1%, weaker than expectations of 8.3%.

The German October ZEW Economic Sentiment stood at -1.1, stronger than expectations of -9.3.

Eurozone October ZEW Economic Sentiment arrived at +2.3, stronger than expectations of -8.0.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.32%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.20%.

China’s Shanghai Composite today closed higher after dozens of Chinese companies unveiled share buyback plans, with investors looking ahead to key economic data from China. Numerous China-listed companies revealed their intentions on Monday to repurchase shares or cancel stock issuance plans, following a series of measures enacted by authorities to bolster a struggling stock market. Meanwhile, brokerage, semiconductor, and new energy stocks gained ground Tuesday. On the negative side, real estate stocks underperformed, with particular attention on Country Garden Holdings Co., as the troubled developer faces a looming deadline to make an interest payment on a dollar bond. The company must pay a $15.4 million coupon by the end of a 30-day grace period, October 17th-18th, after which a default could be declared. Investor attention is currently concentrated on Chinese third-quarter growth data, set to be released on Wednesday.

“China’s economy has shown signs of stabilization... However, these signs might be due to base effects, price factors, or sample bias,” said Ting Lu, chief China economist at Nomura.

Japan’s Nikkei 225 Stock Index closed higher today, tracking overnight gains on Wall Street as investors grew more optimistic that the Israel-Hamas war would not significantly impact the markets. Technology stocks, which had experienced a significant sell-off on Monday, rebounded strongly. As a result, Tokyo Electron Ltd climbed over +2%, Advantest Corp gained more than +1%, and SoftBank Group Corp advanced over +2%. Meanwhile, Japanese government bond yields climbed on Tuesday as investors reacted to weaker-than-anticipated demand at a 20-year bond auction. Investor attention is now firmly directed toward the release of Japanese National Core CPI data for September, scheduled for later this week. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down -3.42% to 21.15.

“My view is that earnings both in Japan and the U.S. will be strong this quarter, and that is likely to support equity prices,” said Kenji Abe, an analyst at Daiwa Securities.

Pre-Market U.S. Stock Movers

NetScout Systems Inc (NTCT) tumbled about -23% in pre-market trading after the company cut its FY24 guidance.

Dollar Tree Inc (DLTR) gained more than +2% in pre-market trading after Goldman Sachs upgraded the stock to Buy from Neutral.

Progressive Corp (PGR) rose nearly +1% in pre-market trading after Citi upgraded the stock to Neutral from Sell.

22nd Century Group Inc (XXII) slumped over -11% in pre-market trading after announcing that it intends to offer and sell in a “best efforts” public offering shares of its common stock and warrants to purchase shares.

Lennox International Inc (LII) rose more than +1% in pre-market trading after Mizuho upgraded the stock to Buy from Neutral.

ViaSat Inc (VSAT) climbed over +6% in pre-market trading after JPMorgan upgraded the stock to Overweight from Neutral.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - October 17th

J&J (JNJ), Bank of America (BAC), Lockheed Martin (LMT), Goldman Sachs (GS), Prologis (PLD), Interactive Brokers (IBKR), Bank of NY Mellon (BK), JB Hunt (JBHT), Omnicom (OMC), Albertsons (ACI), United Airlines Holdings (UAL), Pinnacle (PNFP), Wintrust (WTFC), Hancock Whitney (HWC), Fulton (FULT), Preferred Bank (PFBC), Mercantile (MBWM), Cambridge Bancorp (CATC), Equity Bancshares Inc (EQBK).

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